Buyers and sellers in the legal cannabis industry might think they have a handle on market pricing, but legalized cannabis is still a fledgling industry with supply and demand in constant flux. With internal factors affecting individual cannabis cultivators and external factors shaping the regulatory landscape, cannabis as a commodity deserves comprehensive wholesale spot and forward price assessments so market participants can make informed decisions.
Background on Cannabis Benchmarks
Cannabis Benchmarks, a division of New Leaf Data Services, publishes and licenses benchmark price assessments and cultivation production cost data. On April 24, 2015, Cannabis Benchmarks released its first weekly report, which the company indicated is the industry’s first U.S. wholesale spot and forward cannabis benchmark price assessment, according to a company press release.
“Transparency is essential for markets to function efficiently, and we are proud to be the first price reporting agency to publish national cannabis wholesale spot and forward prices,” said Jonathan Rubin, CEO of New Leaf Data Services.
Rubin added, “Our leadership position is the result of our team’s extensive experience in global commodity price assessments and legal cannabis markets.”
Cannabis Benchmarks’ executive team is made up of Jonathan Rubin, CEO; Ian Laird, CFO and General Counsel; Het Shah, Managing Director, Price Assessments; and Keith Holecek, Managing Director, Data Operations and Client Services.
The impetus for Cannabis Benchmarks came about when Rubin noticed an unmet need in the legal cannabis industry. “Across the cannabis business information space, no firm was systematically collecting and standardizing cultivator cost data and wholesale prices,” Rubin said.
With the skillset to fulfill this need, Cannabis Benchmarks began building relationships to collect completed transaction data and bid-ask data for its weekly reports.
“Cannabis Benchmarks collects public and private transaction and bid-ask data from legal cannabis markets across the country, and then applies a proprietary assessment methodology to derive the wholesale spot price. The forward curve is then shaped with forecasts of supply and demand fundamentals, which incorporate multiple participant viewpoints,” said Het Shah, Managing Director, Price Assessments.
Each weekly report contains that week’s U.S. Cannabis Spot Index and U.S. Cannabis Implied Forward Curve, including discussion of the internal and external factors that affected the market. According to the first weekly report, for the week ending April 24, the U.S. Cannabis Spot Index reported that low quality grades of cannabis were selling for $1,400 per pound, while the highest quality grades were selling for $2,100 to $2,200 per pound. The U.S. Cannabis Implied Forward Curve reported the month of May holding at $1,700. Subsequent reports will be published every Friday at 10 a.m. Mountain Time.
Price Assessment Matters
To the casual consumer, price assessments may seem irrelevant, but the knowledge gained from such data affects investors, entrepreneurs and consumers.
“Understanding wholesale prices, and the trends and market drivers that influence price, are of paramount importance. Pricing fluctuation impacts the entire vertical and is an important factor for business owners and investors to understand profitability and return on capital investments,” said Lori Glauser, President of Signal Bay Research (OTC Pink: SGBY), a diversified holding company with interests in the legal cannabis industry.
“Every week is a margin gamble. A benchmark spot price provides market clarity, which is exactly what participants need to be in the position to negotiate effectively,” said Steve Janjic, CEO of Amercanex, an electronic marketplace in which legal wholesale and retail distributors of cannabis can sell, buy, or exchange inventories on a fully disclosed and transparent market.
Rubin explained, “As the availability of legal cannabis pricing data grows and becomes more stable, we will publish differentials for varying potencies, strains, locations, and other quantitative and qualitative factors that influence wholesale prices.”
Regardless of your position in this industry, price assessment matters, especially when several states are expected to pass some form of legalized cannabis in the coming year, whether through ballot measures or legislation. As the legal cannabis marketplace continues to evolve, Cannabis Benchmarks plans to evolve with it.